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Real Estate Capital Gains Information

Fri, 01/30/2009 - 4:47pm — carol.meadows

Capital Gains on Real Estate?Â

Taxpayers who sell their principal residence can pocket - tax free - as much as $500,000 in profit if they file federal taxes jointly or $250,000 if they file singly.Â The property must have been owned and used as their principal residence for any two of the prior five years.Homeowners can shelter the profits on the sale of a home as often as once every two years.Â If the two-year use and ownership tests are not met but the home is sold because of special circumstances (ie. health, jobloss, etc.) the exclusion is pro-rated. Otherwise, gains above $500,000 or $250,000 are taxed at current capital gains rates, which vary depending on your tax bracket.

Helpful Hint -Homeowners should continue to maintain records of selling and improvement expenses because some states still tax capital gains on home sales. In addition, those expenses can be used to determine your tax basis once you sell the home.

As always be sure to talk to your own tax advisor to make sure you are eligible for deductions you plan on taking.